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Decision Making

Uploaded by Effect on May 09, 2007

Decision making can be simply put as choosing the best option from two or more alternatives. It is, however, much more complicated than this, as Davidson et al. (2006, p. 116) states that making decisions consists of ‘Recognising and defining the nature of a decision situation, identifying alternatives, choosing the ‘best’ alternative and putting it into practice’. This essay will discuss two types of decision making theories, Rational decision making and behavioural decision making.

Managers are posed with a question. They need to recognise and give a definition of the situation and what the outcome is that they wish. The rational decision making theory anticipates that all managers will make the best decision that will most benefit the organisation and the organisational goals. The behavioural model, however, proclaims that managers are affected by their own intuition and ethics that will ultimately alter their perspective of the ‘best’ alternative. They also perceive risk from their own viewpoint which is shaped from their own experiences and culture, therefore there should be an emphasis on objective and quantifiable information (Adler 1999). Managers must also evaluate the level of risk and determine how much they are willing to ‘gamble’, in addition to comparing the level of risk associated between each alternative (Kennedy 2005).

Once a manager has determined what the desired outcome is, they then identify and evaluate the available alternatives and make a rational and logical decision. Again, the behavioural aspect of decision making poses the question of whether the information that the manager is working with is accurate or the level of relevance it has towards the whole picture, this is echoed by (Fox & Clemen 2005) ‘Human limitations of memory and information processing capacity often lead to subjective probabilities’.

The ‘best’ alternative is then selected. Tradeoffs have been evaluated and the most profitable choice that concerns all stakeholders is taken. Rational decision making managers will have made a decision based on only the information provided to them, however a behaviourist will note that a managers intuition (sub-conscious gut feeling) and the escalation of commitment (sticking to a choice even when it isn’t the best) have had an impact on their decision.

In conclusion, the major differences between the behavioural aspects and the rational perspective of decision making as Davidson et al. (2006, p. 125) puts adequately is that mangers should be using accurate information, but...

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Uploaded by:   Effect

Date:   05/09/2007

Category:   Management

Length:   5 pages (1,089 words)

Views:   6100

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